He demanded the closure of all Israeli embassies across Africa, describing Israel as a "gang" and saying it uses "the protection of minorities as an excuse to launch conflicts".
Israel has acknowledged operating what it called a forward policy in Africa between the 1960s and 1980s, intervening in wars in Ethiopia, Uganda and Sudan.
Gaddafi claimed that a Darfur rebel group had opened an office in Tel Aviv while its leader lives under French protection, a reference to Abdelwahid Mohammed Nur, the head of the Sudan Liberation Army who lives in exile in Paris, France.
Al Jazeera's Amr El-Kahky, reporting from the Libyan capital, Tripoli, said: "Libya is portraying itself as opening up, but it is still holding to the same principle: which is anti-Israel feeling, and that is what we have heard from Colonel Gaddafi today, saying that people - the African nations - should shy away from the Israelis because they are the ones behind all the African problems."
The celebrations come amid angry reaction from the US following a hero's welcome Libya granted Abdelbaset Ali Mohmet al-Megrahi, the 1988 Lockerbie bomber, who was freed from a Scottish prison last month on compassionate grounds.
Most of the 270 people killed in the bombing were American nationals.
Gaddafi, the longest-serving leader in Africa and in the Arab world, has also been accused of fomenting bloodshed in the 1980s and 1990s across West Africa and the Sahel.
The AU summit - the third so far this year - will mark the 10th anniversary of the 53-member pan-African organisation and is expected to tackle conflicts in Somalia and Sudan.
"We'll try to focus on all conflict situations... We believe that we can move forward in terms of peace and discussions," Ramtane Lamamra, the AU's peace and security council chief said, singling out Somalia.
Among the leaders present were Omar al-Bashir, the Sudanese leader facing an International Criminal Court (ICC) arrest warrant for alleged war crimes in Darfur, and Robert Mugabe, the Zimbabwean president.
Several leaders expected to be present stayed away, including Jacob Zuma, the South African president, and Hugo Chaves, Venezuela's president.
Gaddafi seized power at the age of 27 in a bloodless coup in September 1969, overthrowing the Western-backed government of King Idriss.